State has good case in pension reform - hold the course

Posted
Thursday, January 10, 2013 1:00 pm

John Hazen White, Jr.

In his two-plus years as the chief executive of the Ocean State, Lincoln Chafee continues to perplex many Rhode Islanders. From the Pleau custody case and the failed sales tax efforts, to the needless “holiday tree” controversy, the “independent” governor remains unpredictable and often tone deaf. But his recent, and most surprising, call for negotiating Rhode Island law with the unions over pension reform legislation, before it’s even tested in court, is his most curious and confounding turn yet. What is he thinking?

The public sector unions have taken the state to court over the landmark pension reform legislation passed into law last fall. The pension law altered some of the pay and retirement benefits stipulations contained within existing contracts between the unions and the state; retirement eligibility ages were raised, younger workers saw the introduction of 401k plans for part of their retirement savings, and COLAs were eliminated for a period of ten years. These sweeping actions were taken because the state faced an unsustainable pension nightmare, with more and more tax dollars every year feeding exponentially rising pension demands. If nothing were done, the state would go bankrupt.

To its credit, the Democratic controlled General Assembly responded to the mountain of data and analysis presented by General Treasurer Gina Raimondo and voted overwhelmingly in favor of the reform plan that she presented, and Governor Chafee, who had courted and received critical union support in winning a three way gubernatorial race, backed her. The reform law is saving Rhode Island millions of dollars each year while strengthening the pension system for the long haul.

While politicians voted for the plan, the unions did not. Their offered solutions to fix the pension problem was to raise taxes and refinance the pension system over the next 20 years, a move that was estimated to cost the state a billion dollars. As soon as the pension reform law passed, their leaders vowed to meet the state in court, which brings us to the present.

The unions want a judgment handed down in Superior Court on the legality of altering pension arrangements without the consent of those affected – state workers and many public school teachers around the state. They are arguing that promises made in collective bargaining agreements made with the state over the years contain an implied contract, and breaching that contract over the objections of the unions is illegal. Both sides have presented their case in court before a judge who refuses to recuse herself from the case, promising to judge fairly and impartially despite having relatives working toward or receiving a pension from the state, as she herself will upon retirement.

The state has a very strong legal defense and should not worry too much about the judge’s fairness. In challenging the judge, though unsuccessfully, the state has placed the burden of fairness squarely on her shoulders; should she rule for the unions the state will point out her perceived conflicts of interest weighing on her decision before the next judicial body to hear the case, at the state Supreme Court level.

Having backed the Raimondo pension reform plan and signed the legislation into law, the Governor now thinks the state should sit down and negotiate a settlement with the unions, in the manner of most civil law cases that get settled before they ever go to court. But this is hardly a typical civil law case. Like a nervous Nellie, the Governor is afraid of the state losing the case. Or is he more concerned at this point with currying union favor for the next election? Sitting down with the unions only means one thing: the state will have to give back some of the gains it put into the reform law, and that will cost us millions. If the state caved and entered negotiations, the unions would see the state as weak and they would be emboldened to claw back as much as they can. Then where would we be?

The fact is, the state can’t afford to give anything back right now or for some years to come. As Gina Raimondo understands better than anyone, altering the terms set into the law would be a calamity, potentially bankrupting the state. Thankfully, legislative leaders understand this too, and are opposed to any negotiations, despite the pressure this puts upon them.

Let the case proceed in Superior Court. It will go up to the Supreme Court next, regardless of which side wins in the first round. Now is not the time to panic. Let’s keep calm and carry on, fortified by a legally sound case that will prevail in the end.